The team came with an architecture of implementing active passive cluster.The node1 is going to have an an instance of sql server 2008 with a single database in it.And the node2 is going to have a instance of sql server 2008 with a repoting database.Whose tables are replicated from database on node1.The failover occurs on from node1 to node2 and node2 to node1.

i got stuck with how could we have a instance of sql server running on active and passive at the same time?

If both nodes are supposed to have SQL running on them, it's not an active-passive cluster. It's an active-active cluster.

Not hard to implement. Install one instance of SQL on the one node (with its disks and cluster group) and install another (different name) instance on the second node, with its own set of disks and cluster group.

In a nutshell, there are Cluster Groups. You install SQL, and its resources get added to one of these groups that you specify. Then, through Cluster Administrator, you can set that group to run on either node (right click the group and click Move Group). That's essentially all there is to moving SQL instances between nodes.

The only difference between active/active and active/passive is that in active/passive, you have everything running on one node, while the other is just idle. In active/active, you have instances running on both nodes, but if one were to fail, it would be able to just move to the other node.

As far as installing SQL on a cluster..running through the setup is a bit different and there are a few extra requirements, but it's fairly simple once you go through it. There are a million pages out there with step by step screenshots (just google sql server 2008 cluster install).